Drummond ordered to halt CBM gas production

Market: Coal, Natural gas
13/12/19

Colombia's high administrative court ordered coal miner Drummond to halt coal bed methane (CBM) gas production.

The temporary ruling tasks the mines and energy ministry and hydrocarbons regulator ANH to enforce the suspension of CBM production at the Caporo field, located in the Caribbean province of Cesar, by no later than 13 March 2020.

Drummond's CBM project has drawn the scrutiny of environmental groups in the wake of a court-ordered ban on unconventional drilling that was not initially associated with CBM, but rather to hydraulic fracturing.

Even though CBM is listed as an unconventional deposit, the technique used at Caporo is conventional, the government's environmental regulator ANLA has said.

But in its new decision, the State Council determined that CBM drilling falls under the unconventional umbrella that is currently prohibited in Colombia, except for recently authorized pilot projects.

"Hydraulic stimulation in conventional reservoirs, in horizontal or vertical wells, is the means to achieve extraction, activities that are currently suspended ....it would be a contradiction to allow production of unconventional deposits to continue because it is clear and indisputable that this activity is temporarily prohibited," the State Council said in its 30-page ruling.

Drummond, which is Colombia's top coal producer, has said it uses conventional vertical drilling at Caporo, similar to the method that has been used in the country for more than 50 years in large oil fields such as Cusiana, Cupiagua and Apiay, rather than horizontal drilling that would be used for hydraulic fracturing. The company declined to respond to queries sent today.

Drummond started CBM production at its La Loma license in the second half of 2018. The firm has drilled 15 vertical wells at Caporo between 2017 and the first half of 2018, and those wells will be halted with the court's order.

The State Council's decision is a blow to the oil industry, which has a green light to set up pilot unconventional drilling projects in Colombia.

Environmental groups including Corporación Podion and the Colombia Free of Fracking Alliance had petitioned the State Council to halt the CBM project because they said it violates the temporary ban on unconventional drilling.

In a 6,462-hectare area known as Caporo North, Drummond plans to drill 57 gas production wells, but to increase output to 14mn cf/d Drummond will need new environmental licenses, the company has said.

The firm signed the exploration and production contract to develop the field in 2004, while in February 2012, Drummond declared the commercial viability of CBM on its La Loma license. Drummond says it has invested $43mn to explore for CBM at La Loma.

The company discovered CBM in the Caporo 1, Iguana 1 and Hicotea 1 wells in 2007-10, according to the ANH.

Drummond's had planned to produce shale gas using fracturing techniques at another section of La Loma, but the initiative is halted until the State Council issues a definitive ruling, which is expected to come in 2020.

Speaking at a mining event today, mines and energy minister Maria Fernanda Suarez said that the government will review the new ruling.

The State Council also ordered the country's controller's office and attorney general's office to oversee the process of suspending CBM activities.

By Diana Delgado

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21/11/24

Cost of government support for fossil fuels still high

London, 21 November (Argus) — The cost of government measures to support the consumption and production of fossil fuels dropped by almost third last year as energy prices declined from record highs in 2022, according to a new report published today by the OECD. But the level of fiscal support remained higher than the historical average despite government pledges to reduce carbon emissions. In an analysis of 82 economies, data from the OECD and the IEA found that government support for fossil fuels fell to an estimated $1.1 trillion in 2023 from $1.6 trillion a year earlier. Although energy prices were lower last year than in 2022, countries maintained various fiscal measures to both stimulate fossil fuel production and reduce the burden of high energy costs for consumers, the OECD said. The measures are in the form of direct payments by governments to individual recipients, tax concessions and price support. The latter includes "direct price regulation, pricing formulas, border controls or taxes, and domestic purchase or supply mandates", the OECD said. These government interventions come at a large financial cost and increase carbon emissions, undermining the net-zero transition, the report said. Of the estimated $1.1 trillion of support, direct transfers and tax concessions accounted for $514.1bn, up from $503.7bn in 2022. Transfers amounted to $269.8bn, making them more costly than tax concessions of $244.3bn. Some 90pc of the transfers were to support consumption by households and companies, the rest was to support producers. The residential sector benefited from a 22pc increase from a year earlier, and support to manufacturers and industry increased by 14pc. But the majority of fuel consumption measures are untargeted, and support largely does not land where it is needed, the OECD said. The "under-pricing" of fossil fuels amounted to $616.4bn last year, around half of the 2022 level, the report said. "Benchmark prices (based on energy supply costs) eased, particularly for natural gas, thereby decreasing the difference between the subsidised end-user prices and the benchmark prices," it said. In terms of individual fossil fuels, the fiscal cost of support for coal fell the most, to $27.7bn in 2023 from $43.5bn a year earlier. The cost of support for natural gas has grown steadily in recent years, amounting to $343bn last year compared with $144bn in 2018. The upward trend is explained by its characterisation as a transition fuel and the disruption of Russian pipeline supplies to Europe, the report said. By Alejandro Moreano and Tim van Gardingen Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Investment funds’ net long on Ice TTF reaches new high

21/11/24

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21/11/24

Investment funds’ net long on Ice TTF reaches new high

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Cop: Talks in Baku torn between mitigation and finance

21/11/24

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21/11/24

Cop: Talks in Baku torn between mitigation and finance

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Cop: EU, four countries commit to 1.5°C climate plans

21/11/24

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21/11/24

Cop: EU, four countries commit to 1.5°C climate plans

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Cop: Australia backs no new coal power call: Correction

20/11/24

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20/11/24

Cop: Australia backs no new coal power call: Correction

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